• The following forecasts of earnings per share (EPS) and dividends per share (DPS) were made at the end of 2012 for a firm with a book value per share of $22.

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• The firm has an equity cost of capital of 12% per annum.

1. Calculate the book value per share (BVPS) for each year from 2013 to 2017.
2. Calculate the return on common equity (ROCE) for each year from 2013 to 2017.
3. Calculate the residual earnings for each year from 2013 to 2017.
4. Calculate the present value of all residual earnings.
5. Calculate the per-share value of equity at the end of 2012.
6. Calculate the per-share value of equity at the end of 2017.
7. Calculate the expected premium in 2017.

2013 2014 2015 2016 2017 $ 3.90 $ 3.31 $ 3.59 $ 3.90 Earnings per share (EPS) Dividends per share (DPS) 3.70 $ 1.00 $ $ 1.00 $ 1.00 $ 1.00 $ 1.00